Minnesota Power asks for another rate increase

It's almost certain your Minnesota Power monthly electric bill will go up in 2017. How much so will depend on the Minnesota Public Utilities Commission.Duluth-based Minnesota Power on Wednesday filed a request for a general rate increase, asking ...

Transmission lines carry power from the Boswell Energy Center to a station where it can be converted to multiple voltages and fed to residential and industry customers. (file photo / News Tribune)

It’s almost certain your Minnesota Power monthly electric bill will go up in 2017. How much so will depend on the Minnesota Public Utilities Commission.Duluth-based Minnesota Power on Wednesday filed a request for a general rate increase, asking the PUC to approve an immediate 8 percent increase for homeowners on Jan. 1 and then another 10 percent increase after the state regulators’ lengthy rate case process.The utility says it needs the money to recover hundreds of millions of dollars invested in its electrical delivery infrastructure in recent years to better deliver a cleaner mix of energy to its customers.“It’s really recovering the investment we’d made in our system,” Dave McMillan, Minnesota Power executive vice president, told the News Tribune on Wednesday.The utility has incurred increased costs to recover from storms and “harden” its portion of the grid against extreme weather events. And the conversion from a 95 percent coal-generated system as recently as 2005 to a now 30 percent renewable system has added to the utility's investment, said Amy Rutledge, Minnesota Power spokeswoman.The rate increase also will help balance the utility's current cost recovery system, McMillan said, with Minnesota Power officials saying a recent study showed residential customers currently are paying 35 percent less than the true cost of getting electricity into their homes. “Every Minnesota Power customer will experience increased rates under our proposal. However, we are asking the (PUC) to start aligning rates more closely with the true cost of providing service,” McMillan said.The PUC is expected to decide on the interim 8 percent request by December. The final increase amount will be decided after the lengthy, 12- to 18-month contested case hearing process which includes public hearings and a decision by an administrative law judge.It’s the first general rate increase request by Minnesota Power since 2009. But it’s likely to raise eyebrows by regulators and customers alike because of its cumulative effect on monthly bills.The 18 percent request is on top of another 10 percent proposed increase as part of the rate shift Minnesota Power is seeking, under orders from the state Legislature, to lower rates for taconite plants and paper mills.For Duluth customers, it would be a triple whammy, with the two rate increases added to an increase in the city’s monthly franchise fee charged to Minnesota Power. That’s going up from 1 to 3 percent in 2017.The 18 percent hike sought in Wednesday’s filing would add another $15 to the average residential customer’s monthly bill of about $79.44. The 10 percent taconite plant shift would add another $8 each month. The city franchise fee would add another $2 or so.If all are approved, that could mean 30 percent higher bills for the utility's residential customers in Duluth - from an average of under $80 to more than $105 per month.Minnesota Power officials are quick to point out that the taconite relief increase was ordered by the 2015 Legislature and that the utility has no control over the city franchise fee.Small-business customers would pay about $28 more per month on average under the proposal submitted Wednesday.Buddy Robinson, staff director of Minnesota Citizens Federation Northeast, said Minnesota Power can't justify the cumulative rate increase simply to bolster profits for its shareholders, saying “strong profits for faraway shareholders are apparently a higher priority than the economic well-being of our local region.”He again challenged the utility’s assessment that homeowners aren’t paying their fair share now.“Minnesota Power’s proposed 18 percent residential rate hike, coming on top of an expected 5 to 10 percent hike from the EITE (taconite) case, will be a severe burden to local residents with moderate and low incomes,” Robinson told the News Tribune. “The large loss of consumer spending power will also hurt the local economy. Minnesota Power’s desire to saddle the residential class with the brunt of the hike is based on their unproven theory that big industry is subsidizing residential rates. The Citizens Federation has challenged that theory before, and will again.” Kelsey Johnson, president of the Iron Mining Association of Minnesota trade group, said the new rate hike would more than undo the taconite industry rate cut now being considered. The rate cut would have given taconite operations $13 million in savings each year. But the new rate increase adds $33 million in new costs, Johnson said.“We think this is an untenable request and we are asking the Public Utilities Commision to reject Minnesota Power’s proposal,” Johnson said. “This is going backwards at a time when we are still trying to recover’’ from the U.S. steel and iron ore industry downturn that idled many Minnesota operations.”The News Tribune first reported in August the potential for the general rate increase when Allete, Minnesota Power’s parent company, told industry analysts that it was expecting to make the proposal in the fourth quarter. The increase, if approved, would add about $55 million to Minnesota Power’s revenue annually “to support infrastructure investments, efficiency upgrades and business expenses as the company continues to transform how power is produced and delivered to customers.” “Since 2011, Minnesota Power has invested extensively in our ambitious EnergyForward plan, changing how we provide safe and reliable energy to our customers in ways that include producing cleaner power, strengthening the electric grid that delivers energy, and adding technology that will help improve customer control over energy use,” McMillan said.The majority of the rate request - $37 million - is related to additional EnergyForward capital investments which include upgrades to transmission and distribution infrastructure, measures to protect against extreme weather events and enable the safe integration of renewable resources, and the continuation of efficiency and environmental improvements at the company’s existing power plants. Other components of the rate request address lower sales revenue and pension investment costs.Utility officials noted that they will continue to fund energy conservation programs for customers to reduce their use and cost of electricity, and will continue to offer low-income residents assistance in paying bills.Minnesota Power provides electric service within a 26,000-square-mile area in Northeastern and central Minnesota, with 145,000 customers - including some of the largest industrial customers in the U.S.